New Credit Card Rules start Monday 2/22/2010

We have all heard that new laws have been passed to reel in the credit card companies. Well those new laws, for good or bad take effect Monday, 2/22/2010.

Here are the details by category.

Let's start with interest rates:

1. Rates can not go up in the accounts 1st year unless there was an intro rate which expires.
2. If you have an existing balance your rate can only go up if you are more than 60 days late on your payments. Your card holder must also monitor your payments because if you are on time for the next 6 consecutive months they have to return your interest rate to the original rate before it was increased for late payments.
3. A big however, should an interest rate increase be triggered there is no limit to how high it can go. Since there are no caps on credit card interest rates the fear would be that the card companies would raise them substantially if they had the opportunity to do so.     

How about Fees:

1. In the first year of a credit card the fees are capped at 25% of the cards limit. These fees include but are not limited to annual fees, activation fees, service fees but do not include interest caps as mentioned above.
2. There is no cap on fees in year 2 and beyond.        

Over-The-Limit Fees: (This is a huge one!)

1. You as the card holder must specifically authorize and agree to permit transactions that exceed your limit. Otherwise over-the-limit fees can not be charged. Beware; credit card companies are going to be using pop up windows on your computer to authorize the over-the-limit charges.
2. The way it used to be, if your interest due put you over-the-limit you were charged the fee. If you had a late payment fee this previously would have triggered the over-the-limit fee as well. This can no longer happen.
3. Should an over-the-limit fee be triggered by your authorization you can not be charged more than 1 over-the-limit fee per billing cycle.

Disclosure statements and or card holder agreements will now include:

1. How long it will take for credit cards to be paid off if you only pay the minimum payment.
2. Statements will also show how much needs to be paid per month to pay a balance off in 3 years.

Due Dates & Grace Periods:

1. Due dates must now remain consistent.
2. Your credit card statement must be sent out 21 days prior to your due date.
3. During this 21 days finance charges and fees can not be applied. They can be as soon as it is up. Please also note that if you keep a balance on your card from month to month interest will continue to accrue daily.
4. Seems that about 50% of card issuers have gone to a 25 day grace period.

The term Universal Default: (In the past, if you were late on a credit card, auto loan etc. your other credit cards would often increase their interest rates on you. Even when your payments to them were on time.)

1.  As in our section on interest rates above - your rate can not be increased in the 1st year unless your introductory or promotional rate expires during that time. Beware, many credit card companies will start out new accounts with intro rates automatically to get your business. These are known as teaser rates and the industry has used them for years.
2. If you have an account over 1 year old you must receive notice from your credit card company 45 days in advance of any interest rate change.
3. If a credit card company is going to raise your rate you must be given the option to cancel your account and not incur the rate increase. (Please note, by closing a credit card account you not only lose the credit flexibility but you also lose the age/history of that credit card. Remember that 15% of your credit score is made up of the age of your credit cards. How old they are.)

Age for credit cards and college campus marketing:

1. If you are under 21 years of age you can no longer get a credit card unless you have a co-signer or you prove you have the means to repay the card. (Wow, what a concept!)
2. Banks are not allowed to hand out gifts on or near a college campus. They are also not allowed to hand out gifts at college related events.
3. Here is a twist - Colleges must also disclose any type of marketing deals they make with credit card companies or their marketers.

Be vigilant, credit card companies will search for other ways to get to 18 - 21 years olds and get them hooked on credit early. Teach our younger generation the lessons many of us learned the hard way. Credit can be good and is a necessary part of today's society but it must be treated with respect, restraint and caution.